His government would devote billions to roads, law and order, airports and ports over the coming years to ensure rural and coastal Papua New Guineans could move beyond producing only for local markets and that liquefied natural gas transport would be secure.

"Clearly we are well placed to help meet the growing demands of energy by the Asian region, but it is not going to be without significant challenges," he told the Lowy Institute for International Policy in Sydney on Thursday.

He said lifting productivity, including agricultural output, would be chief among these challenges.

"PNG has never really focused on productivity, and especially on government measures to improve productivity," he said.

PNG's relationship with Indonesia - with which it shares a major border - remained crucial, Mr O'Neill said.

"But our fastest growing relationship is with the People's Republic of China," he said, adding that China was on track to eclipse all other trade partners but Australia.

Mr O'Neill stressed that the burgeoning relationship between PNG and China centred on trade and investment, not security or defence.

"We feel that the security issues that have been expressed by many of our traditional partners is unnecessary, we are following the same path that Australia and New Zealand have taken by increasing our relationship with China in trade and investment," he said.

Ties between Port Moresby and Canberra would remain strong, he said.

"I have no doubt whatsoever that the relationship between PNG and Australia will continue to grow," Mr O'Neill said.

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